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TITLE VIGRANTSCHAPTER 1

Scope and form of grants

Article 121

(e) expenditure implemented under shared management and

indirect management within the meaning of Articles 58,59 and 60, unless specified otherwise in the financialrules applicable to the budget of the entities or personsentrusted pursuant to point (c) of Article 58(1) or indelegation agreements;

Scope of grants1.Grants are direct financial contributions, by way ofdonation, from the budget in order to finance any of thefollowing:

(a) an action intended to help achieve a Union policy objective;

(b) the functioning of a body which pursues an aim of general

Union interest or has an objective forming part of, andsupporting, a Union policy ('operating grants').

Grants shall be covered either by a written agreement or by a

Commission decision notified to the successful applicant of agrant.

The Commission may establish secure electronic systems for

exchanges with the beneficiaries.

The Commission shall be empowered to adopt delegated acts in

accordance with Article 210 concerning the detailed specification of the scope of grants, and concerning rules determiningwhether grant agreements or grant decisions are to be used.Furthermore, the Commission shall be empowered to adoptdelegated acts in accordance with Article 210 concerningdetails of the electronic exchange system, including theconditions under which documents submitted by means ofsuch systems, including grant agreements, are to be deemedoriginals and to have been signed, and the use of frameworkpartnerships.

2.The following do not constitute grants within themeaning of this Title:

(a) expenditure on the members and staff of the institutions

and contributions to the European schools;

(b) public contracts as referred to in Article 101, aid paid as

macro-financial assistance, and budget support;

(f) contributions to executive agencies referred to in Article 62,

made by virtue of each agency's constitutive act;(g) expenditure relating to fisheries markets as referred to inpoint (f) of Article 3(2) of Council Regulation (EC)No 1290/2005 of 21 June 2005 on the financing of thecommon agricultural policy (1);(h) repayment of travel and subsistence expenses incurred by,or where appropriate any other indemnities paid to, personsinvited or mandated by the institutions;(i) prizes given as rewards for a contest, to which Title VII ofPart One applies.3.Interest rate rebates and guarantee fee subsidies shall betreated as grants, provided that they are not combined in asingle measure with financial instruments as referred to inTitle VIII of Part One.Such rebates and subsidies shall be subject to the provisions ofthis Title, with the exception of the following:(a) the co-financing principle as set out in Article 125(3);(b) the no-profit principle as set out in Article 125(4);(c) for actions where the objective is to reinforce the financialcapacity of a beneficiary or to generate an income, theassessment of the financial capacity of the applicant asreferred to in Article 132(1).4.Each institution may award grants for communicationactivities where, for duly justified reasons, the use of publicprocurement procedures is not appropriate.Article 122

(c) financial instruments, as well as shareholdings or equity

participation in international financial institutions such asthe European Bank for Reconstruction and Development(EBRD) or specialised Union bodies such as the EuropeanInvestment Fund;

(d) contributions paid by the Union as subscriptions to bodies

of which it is a member;

Beneficiaries1.Where several entities satisfy the criteria for being awardeda grant and together form one entity, that entity may be treatedas the sole beneficiary, including where the entity is specificallyestablished for the purpose of implementing the action to befinanced by the grant.(1) OJ L 209, 11.8.2005, p. 1.

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2.For the purpose of this Title, the following entities shall beconsidered as entities affiliated to the beneficiary:(a) entities forming the beneficiary in accordance withparagraph 1;(b) entities that satisfy the eligibility criteria and that do not fallwithin one of the situations referred to in Article 131(4)and that have a link with the beneficiary, in particular alegal or capital link, which is neither limited to the actionnor established for the sole purpose of its implementation.3.The Commission shall be empowered to adopt delegatedacts in accordance with Article 210 concerning the minimumcontent of grant agreements or decisions, in particular, where agrant is awarded to several entities, the specific obligations ofthe coordinator, if any, and of the other beneficiaries, theapplicable responsibility regime and the conditions for addingor removing a beneficiary.Article 123Forms of grants1.

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2.The authorisation shall at least be supported by thefollowing:

(a) justification concerning the appropriateness of such forms

of financing with regard to the nature of the supportedactions or work programmes, as well as to the risks ofirregularities and fraud and costs of control;

(b) identification of the costs or categories of costs covered by

(c) description of the methods for determining lump sums, unit

costs or flat-rate financing, and of the conditions forreasonably ensuring that the no-profit and co-financingprinciples are complied with and that double financing ofcosts is avoided. Those methods shall be based on:

(i) statistical data or similar objective means; or

Grants may take any of the following forms:

(a) reimbursement of a specified proportion of the eligible

costs, referred to in Article 126, actually incurred;(b) reimbursement on the basis of unit costs;(c) lump sums;(d) flat-rate financing;(e) a combination of the forms referred to in points (a) to (d).2.When determining the appropriate form of a grant, thepotential beneficiaries' interests and accounting methods shallbe taken into account to the greatest possible extent.3.The Commission shall be empowered to adopt delegatedacts in accordance with Article 210 concerning rules for thedifferent forms of grants, including low value grants.Article 124Lump sums, unit costs and flat-rate financing1.Without prejudice to the provisions of the basic act, theuse of lump sums, unit costs or flat-rate financing shall beauthorised by way of a Commission decision ensuring respectfor the principle of equal treatment of beneficiaries for the samecategory of actions or work programmes.Where the maximum amount per grant does not exceed theamount of a low value grant, the authorisation may be given bythe authorising officer responsible.

(ii) a beneficiary-by-beneficiary approach, by reference to

certified or auditable historical data of the beneficiaryor to its usual cost accounting practices.

3.Where recourse to the usual cost accounting practices ofthe beneficiary is authorised, the authorising officer responsiblemay assess compliance of those practices ex ante with theconditions set out in paragraph 2 or through an appropriatestrategy for ex post controls.

If the compliance of the beneficiary's usual cost accounting

practices with the conditions referred to in paragraph 2 hasbeen established ex ante, the amounts of lump sums, unitcosts or flat-rate financing determined by application of thosepractices shall not be challenged by ex post controls.

The authorising officer responsible may consider that the usual

cost accounting practices of the beneficiary are compliant withthe conditions referred to in paragraph 2 if they are accepted bynational authorities under comparable funding schemes.

4.The grant decision or agreement may authorise or impose,in the form of flat-rates, funding of the beneficiary's indirectcosts up to a maximum of 7 % of total eligible direct costs forthe action, except where the beneficiary is in receipt of anoperating grant financed from the budget. The 7 % ceilingmay be exceeded on the basis of a reasoned decision of theCommission.

5.SME owners and other natural persons who do notreceive a salary may declare eligible personnel costs for thework carried out under an action or work programme, onthe basis of unit costs determined by way of a Commissiondecision.

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5.For the purpose of this Title, profit shall be defined as asurplus of the receipts over the eligible costs incurred by thebeneficiary, when the request is made for payment of thebalance.

CHAPTER 2

PrinciplesArticle 125General principles applicable to grants1.Grants shall be subject to the principles of transparencyand equal treatment.2.Without prejudice to Article 130, grants shall not becumulative or awarded retrospectively.3.Grants shall involve co-financing without prejudice to thespecific rules laid down in Title IV of Part Two.Unless otherwise specified in this Regulation, the regulationsgoverning political parties at European level and the rulesregarding their funding are laid down in Regulation (EC)No 2004/2003 of the European Parliament and of theCouncil of 4 November 2003 on the regulations governingpolitical parties at European level and the rules regarding theirfunding (1).4.Grants shall not have the purpose or effect of producing aprofit within the framework of the action or the workprogramme of the beneficiary (no-profit principle).

The receipts referred to in the first subparagraph shall be limited

to income generated by the action or work programme, as wellas financial contributions specifically assigned by donors to thefinancing of the eligible costs.

In the case of an operating grant, amounts dedicated to the

building up of reserves shall not be taken into account forthe purpose of verifying compliance with the no-profit principle.

6.If a political party at Union level realises a surplus ofincome over expenditure at the end of a financial year inwhich it received an operating grant, the part of that surpluscorresponding to up to 25 % of the total income for that yearmay, by derogation from the no-profit principle laid down inparagraph 4, be carried over to the following year provided thatit is used before the end of the first quarter of that followingyear.

For the purpose of verifying compliance with the no-profit

principle, the own resources, in particular donations andmembership fees, aggregated in the annual operations of apolitical party at Union level, which exceed 15 % of theeligible costs to be borne by the beneficiary, shall not betaken into account.

The first subparagraph shall not apply to:

(a) actions the objective of which is the reinforcement of thefinancial capacity of a beneficiary, or actions which generatean income to ensure their continuity after the period ofUnion financing provided for in the grant decision oragreement;(b) study, research or training scholarships paid to naturalpersons;

The second subparagraph shall not apply if the financial

reserves of a political party at Union level exceed 100 % ofits average annual income.

7.Grants may be awarded without a call for proposals to theEIB or the European Investment Fund for actions of technicalassistance. In such cases Articles 131(2) to (5) and 132(1) shallnot apply.

(c) other direct support paid to natural persons most in need,

such as unemployed persons and refugees;(d) grants based on flat rates and/or lump sums and/or unitcosts where these comply with the conditions set out inArticle 124(2);

8.The Commission shall be empowered to adopt delegatedacts in accordance with Article 210 complementing the generalprinciples applicable to grants, including the no-profit principleand the co-financing principle. Furthermore, the Commissionshall be empowered to adopt delegated acts in accordancewith Article 210 concerning the definition of technicalassistance.

(e) low value grants.

Where a profit is made, the Commission shall be entitled torecover the percentage of the profit corresponding to the Unioncontribution to the eligible costs actually incurred by the beneficiary to carry out the action or work programme.(1) OJ L 297, 15.11.2003, p. 1.

Article 126Eligible costs1.Grants shall not exceed an overall ceiling expressed interms of an absolute value which shall be established on thebasis of estimated eligible costs.

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Grants shall not exceed the eligible costs.

2.Eligible costs are costs actually incurred by the beneficiaryof a grant which meet all of the following criteria:(a) they are incurred during the duration of the action or of thework programme, with the exception of costs relating tofinal reports and audit certificates;(b) they are indicated in the estimated overall budget of theaction or work programme;(c) they are necessary for the implementation of the action orof the work programme which is the subject of the grant;(d) they are identifiable and verifiable, in particular beingrecorded in the accounting records of the beneficiary anddetermined according to the applicable accounting standardsof the country where the beneficiary is established andaccording to the usual cost accounting practices of thebeneficiary;(e) they comply with the requirements of applicable tax andsocial legislation;(f) they are reasonable, justified, and comply with the principleof sound financial management, in particular regardingeconomy and efficiency.3.Calls for proposals shall specify the categories of costsconsidered as eligible for Union funding.Without prejudice to the basic act and in addition to paragraph2, the following categories of costs shall be eligible where theauthorising officer responsible has declared them as such underthe call for proposals:(a) costs relating to a pre-financing guarantee lodged by thebeneficiary of the grant, where that guarantee is requiredby the authorising officer responsible pursuant toArticle 134(1);(b) costs relating to external audits where such audits arerequired in support of the requests for payments by theauthorising officer responsible;(c) value added tax ("VAT") where it is not recoverable underthe applicable national VAT legislation and is paid by abeneficiary other than a non-taxable person as defined inthe first subparagraph of Article 13(1) of Council Directive2006/112/EC of 28 November 2006 on the commonsystem of value added tax (1);

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(e) salary costs of the personnel of national administrations to

the extent that they relate to the cost of activities which therelevant public authority would not carry out if the projectconcerned were not undertaken.

4.Costs incurred by entities affiliated to a beneficiary asdescribed in Article 122 may be accepted as eligible by theauthorising officer responsible under the call for proposals. Insuch a case, the following conditions shall apply cumulatively:

(a) the entities concerned are identified in the grant agreement

or decision;

(b) the entities concerned abide by the rules applicable to the

beneficiary under the grant agreement or decision withregard to eligibility of costs and rights of checks andaudits by the Commission, OLAF and the Court of Auditors.

5.The Commission shall be empowered to adopt delegatedacts in accordance with Article 210 concerning further specifications on eligible costs.

Article 127Co-financing in kind1.For the purpose of calculating the profit generated by thegrant, co-financing in the form of contributions in kind shallnot be taken into account.

2.The authorising officer responsible may acceptcontributions in kind as co-financing, if considered necessaryor appropriate. Where co-financing inkind is offered in supportof low value grants and the authorising officer responsible hasdecided to refuse this, he or she shall justify why it isunnecessary or inappropriate.

Such contributions shall not exceed:

(a) either the costs actually incurred by third parties and dulysupported by accounting documents;

(b) or, in the absence of such documents, the costs that

correspond to those generally accepted on the market inquestion.

Contributions in kind shall be presented separately in the

estimated budget to reflect the total resources allocated to theaction. Their unit value shall be evaluated in the provisionalbudget and shall not be subject to subsequent changes.

(d) depreciation costs, provided they are actually incurred by

the beneficiary;(1) OJ L 347, 11.12.2006, p. 1.

Contributions in kind shall comply with national tax and social

security rules.

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Article 128Transparency

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the requirements regarding the work programme, the content of

calls for proposals, the exceptions to calls for proposals,information for applicants and ex post publication.

1.Grants shall be subject to a work programme, to bepublished prior to its implementation.Article 129Principle of non-cumulative awardThat work programme shall be implemented through thepublication of calls for proposals, except in duly justified exceptional cases of urgency or where the characteristics of the beneficiary or of the action leave no other choice for a given action,or where the beneficiary is identified in a basic act.

The first subparagraph shall not apply to crisis management aid,

civil protection operations or humanitarian aid operations.

2.Calls for proposals shall specify the planned date by whichall applicants shall have been informed of the outcome of theevaluation of their application and the indicative date for thesignature of grant agreements or notification of grant decisions.

1.Each action may give rise to the award of only one grantfrom the budget to any one beneficiary, except where otherwiseauthorised in the relevant basic acts.

A beneficiary may be awarded only one operating grant from

the budget per financial year.

The applicant shall immediately inform the authorising officers

of any multiple applications and multiple grants relating to thesame action or to the same work programme.

In no circumstances shall the same costs be financed twice by

the budget.

Those dates shall be fixed on the basis of the following periods:

(a) for informing all applicants of the outcome of the

evaluation of their application, a maximum of six monthsfrom the final date for submission of complete proposals;

(b) for signing grant agreements with applicants or notifying

grant decisions to them, a maximum of three months fromthe date of informing applicants they have been successful.

Those periods may be adjusted in order to take into account

any time needed to comply with specific procedures that maybe required by the basic act in accordance with Regulation (EU)No 182/2011 of the European Parliament and of the Council (1)and may be exceeded in exceptional, duly justified cases, inparticular for complex actions, where there is a large numberof proposals or delays attributable to the applicants.

The authorising officer by delegation shall report in his or her

annual activity report on the average time taken to informapplicants, sign grant agreements or notify grant decisions. Inthe event of the periods referred to in the second subparagraphbeing exceeded, the authorising officer by delegation shall givereasons and, where not duly justified in accordance with thethird subparagraph, shall propose remedial action.

3.All grants awarded in the course of a financial year shallbe published annually in accordance with Article 35(2) and (3).

1.A grant may be awarded for an action which has alreadybegun provided that the applicant can demonstrate the need forstarting the action priorto signature of the grant agreement ornotification of the grant decision.

In such cases, costs eligible for financing shall not have beenincurred prior to the date of submission of the grant application, except in duly justified exceptional cases as providedfor in the basic act or in the event of extreme urgency forcrisis management aid, civil protection operations and humanitarian aid operations, or in situations of imminent or immediatedanger threatening to escalate into armed conflict or todestabilise a country, whereby an early engagement by theUnion would be of major importance in promoting conflictprevention.

No grant may be awarded retroactively for actions already

completed.

The Commission shall be empowered to adopt delegated acts in

2.In the case of operating grants, the grant agreement shallbe signed or notification of the grant decision given within sixmonths of the start of the beneficiary's financial year. Costseligible for financing may neither have been incurred beforethe grant application was submitted nor before the start ofthe beneficiary's financial year.

(a) legal persons; or

(b) natural persons, in so far as this is required by the nature or

characteristics of the action or the objective pursued by theapplicant.

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(b) when such certification has recently been provided in

another award procedure.

5.Administrative and financial penalties which are effective,proportionate and dissuasive may be imposed on applicants bythe authorising officer responsible, in accordance withArticle 109.

Those penalties may also be imposed on beneficiaries who at

the moment of the submission of the application or during theimplementation of the grant, have made false declarations insupplying the information required by the authorising officerresponsible or fail to supply that information.

Article 132For the purposes of point (a) of the first subparagraph, grantapplications may be eligible if submitted by entities which donot have legal personality under the applicable national law,provided that their representatives have the capacity toundertake legal obligations on behalf of the entity and offerguarantees for the protection of the Union's financial interestsequivalent to those offered by legal persons.

3.The application shall state the legal status of the applicantand demonstrate his or her financial and operational capacity tocarry out the proposed action or work programme.

For that purpose the applicant shall submit a declaration on his

or her honour and, unless the grant is a low value grant, anysupporting documents requested, on the basis of a riskassessment, by the authorising officer responsible. Theprerequisite documents shall be indicated in the call forproposals.

Selection and award criteria

1.The selection criteria announced in advance in the call forproposals shall be such as to make it possible to assess theapplicant's ability to complete the proposed action or workprogramme.

2.The award criteria announced in advance in the call forproposals shall be such as to make it possible to assess thequality of the proposals submitted in the light of the objectivesand priorities set.

Article 133The verification of financial capacity shall not apply to naturalpersons in receipt of scholarships, to natural persons most inneed and in receipt of direct support, to public bodies or international organisations. The authorising officer responsible may,depending on a risk assessment, waive the obligation to verifythe operational capacity of public bodies or internationalorganisations.

4.Article 106(1) and Articles 107, 108 and 109 shall alsoapply to grant applicants. Applicants shall certify that they arenot in one of the situations referred to in those Articles.However, the authorising officer responsible shall not requiresuch certification in the following cases:

(a) low value grants;

Evaluation procedure1.Proposals shall be evaluated, on the basis of preannounced selection and award criteria, with a view to determining which proposals may be financed.

2.The authorising officer responsible shall, on the basis ofthe evaluation provided for in paragraph 1, draw up the list ofbeneficiaries and the amounts approved.

3.The authorising officer responsible shall inform applicantsin writing of the decision on their application. If the grantrequested is not awarded, the institution concerned shall givethe reasons for the rejection of the application, with reference inparticular to the selection and award criteria.

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4.The Commission shall be empowered to adopt delegatedacts in accordance with Article 210 concerning detailed rules onthe evaluation and award of grants and information to applicants.

CHAPTER 4

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4.Where such errors, irregularities or fraud are attributableto the beneficiary, or should the beneficiary breach his or herobligations under a grant agreement or decision, the authorisingofficer responsible may, in addition, reduce the grant or recoveramounts unduly paid under the grant agreement or decision, inproportion to the seriousness of the errors, irregularities orfraud or of the breach of obligations, provided that the beneficiary has been given the opportunity to make observations.

Payment and control

Article 134Pre-financing guarantee1.The authorising officer responsible may, if he or shedeems it appropriate and proportionate, on a case-by-casebasis and subject to risk analysis, require the beneficiary tolodge a guarantee in advance in order to limit the financialrisks connected with the payment of pre-financing.

5.Where controls or audits demonstrate systemic orrecurrent errors, irregularities, fraud or breach of obligationsattributable to the beneficiary and having a material impacton a number of grants awarded to that beneficiary undersimilar conditions, the authorising officer responsible maysuspend implementation of all the grants concerned or, whereappropriate, terminate the concerned grant agreements ordecisions with that beneficiary, in proportion to the seriousnessof the errors, irregularities, fraud or of the breach of obligations,provided that the beneficiary has been given the opportunity tomake observations.

The authorising officer responsible may, in addition, following

an adversarial procedure, reduce the grants or recover amountsunduly paid in respect of all the grants affected by the systemicor recurrent errors, irregularities, fraud or breach of obligationsreferred to in the first subparagraph that may be audited inaccordance with the grant agreements or decisions.

Payment of grants and controls

1.The amount of the grant shall not become final until afterthe authorising officer responsible has approved the finalreports and accounts, without prejudice to subsequent checksby the institution concerned, which shall be carried out in atimely manner.

2.Where the award procedure proves to have been subjectto substantial errors, irregularities or fraud, the authorisingofficer responsible shall suspend the procedure and may takewhatever measures are necessary, including the cancellation ofthe procedure. The authorising officer responsible shall informOLAF immediately of suspected cases of fraud.

3.Where, after the award of the grant, the award procedureor the implementation of the grant proves to have been subjectto substantial errors, irregularities, fraud, or breach ofobligations, the authorising officer responsiblemay, dependingon the stage reached in the procedure and, provided that theapplicant or beneficiary has been given the opportunity to makeobservations:

(a) refuse to sign the grant agreement or to give notification of

the grant decision;

6.The authorising officer responsible shall determine theamounts to be reduced or recovered, wherever possible andpracticable, on the basis of costs unduly declared as eligiblefor each grant concerned, following acceptance of the revisedfinancial statements submitted by the beneficiary.

7.Where it is not possible or practicable to quantifyprecisely the amount of ineligible costs for each grantconcerned, the amounts to be reduced or recovered may bedetermined by extrapolating the reduction or recovery rateapplied to the grants for which the systemic or recurrenterrors or irregularities have been demonstrated, or, whereineligible costs cannot serve as a basis for determining theamounts to be reduced or recovered, by applying a flat rate,having regard to the principle of proportionality. The beneficiary shall be given the opportunity to make observationson the extrapolation method or flat rate to be applied and topropose a duly substantiated alternative method or rate beforethe reduction or recovery is made.

8.The Commission shall ensure equal treatment of beneficiaries of a programme, in particular where it is implementedby several authorising officers responsible.

(b) suspend implementation of the grant; or

(c) where appropriate, terminate the grant agreement or

decision.

Beneficiaries shall be informed of the means for challenging

decisions taken under paragraphs 3, 4, 5, 6 and 7 of thisArticle, in accordance with Article 97.

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9.The Commission shall be empowered to adopt delegatedacts in accordance with Article 210 concerning detailed rulesfor the payment of grants and controls, including rulesconcerning supporting documents and the suspension andreduction of grants.

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parties, the beneficiary may give such financial support

provided that the following conditions are met:

(a) before awarding the grant, the authorising officer

responsible has verified that the beneficiary offers adequateguarantees as regards the recovery of amounts due to theCommission;

Article 136Periods for record-keeping1.Beneficiaries shall keep records, supporting documents,statistical records and other records pertaining to a grant forfive years following the payment of the balance, and for threeyears in the case of low value grants.

2.Records pertaining to audits, appeals, litigation, or thepursuit of claims arising out of the performance of theproject shall be retained until such audits, appeals, litigationor claims have been disposed of.

(b) the conditions for the giving of such support are strictlydefined in the grant decision or agreement between thebeneficiary and the Commission, in order to avoid theexercise of discretion by the beneficiary;

(c) the amounts concerned are small, except where the financialsupport is the primary aim of the action.

2.Each grant decision or agreement shall provide expresslyfor the Commission and the Court of Auditors to exercise theirpowers of control, concerning documents premises andinformation, including that stored on electronic media, overall third parties who have received Union funds.

CHAPTER 5

ImplementationArticle 137Implementation contracts and financial support to thirdparties1.Where implementation of an action or a workprogramme requires financial support to be given to third

3.The Commission shall be empowered to adopt delegatedacts in accordance with Article 210 concerning detailed rules onimplementation contracts and financial support to third parties.

TITLE VIIPRIZES

Article 138General rules1.Prizes shall respect the principles of transparency andequal treatment and shall promote the achievement of policyobjectives of the Union.

2.For this purpose, prizes shall be subject to a workprogramme to be published prior to its implementation. Thework programme shall be implemented through the publicationof contests.

Contests for prizes with a unit value of EUR 1 000 000 or moremay only be published if they are provided for in the statementsor any other relevant document referred to in point (e) ofArticle 38(3).

The rules of the contest shall at least lay down the conditionsfor participation including the exclusion criteria provided for inArticle 106(1) and Articles 107, 108 and 109, the awardcriteria, the amount of the prize and the payment arrangements.

Prizes may not be awarded directly without a contest and shall

be published annually in accordance with Article 35(2) and (3).

3.Entries in a contest shall be evaluated by a panel ofexperts on the basis of the published rules of the contest.

Prizes shall then be awarded by the authorising officer respon

sible, on the basis of the evaluation provided by the panel ofexperts who shall be free to decide whether to recommend theaward of prizes, depending on their appraisal of the quality ofthe entries.

4.The amount of the prize shall not be linked to costsincurred by the winner.

5.Where implementation of an action or work programmerequires prizes to be given to third parties by a beneficiary of aUnion grant, that beneficiary may give such prizes provided thatthe minimum content of the rules of the contest, as laid downin paragraph 2, is strictly defined in the grant decision oragreement between the beneficiary and the Commission, withno margin for discretion.

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6.The Commission shall be empowered to adopt delegatedacts in accordance with Article 210 concerning detailed rules onfinancial instruments, including the selection of entitiesentrusted with the implementation of financial instruments,the content of delegation agreements, management costs andfees, the specific rules for fiduciary accounts, the direct implementation of the financial instruments and the selection ofmanagers, of financial intermediaries and of final recipients.

Notwithstanding the first subparagraph, financial instruments

may be established, in duly justified cases, without being authorised by means of a basic act, provided that such instrumentsare included in the budget in accordance with point (e) ofArticle 49(1).

Article 140

Scope

2.Where Union support is provided by means of financialinstruments and combined in a single measure with elementsdirectly related to financial instruments targeting the same finalrecipients, including technical assistance, interest rate rebatesand guarantee fee subsidies, this Title shall apply to allelements of that measure.

Principles and conditions applicable to financial

instruments1.Financial instruments shall be used in accordance with theprinciples of sound financial management, transparency,proportionality, non-discrimination, equal treatment andsubsidiarity, and in accordance with their objectives and,where applicable, the duration established in the basic act forthose financial instruments.

2.3.Where financial instruments are combined with grantsfunded from the budget under Title VI of Part One forelements not directly related to financial instruments, separaterecords shall be maintained for each source of financing.

4.The Commission may implement financial instrumentsunder direct management, or under indirect management, asset out in the basic act, by entrusting tasks to entitiespursuant to points (ii), (iii), (v) and (vi) of Article 58(1)(c).

The entities entrusted pursuant to points (ii), (iii), (v) and (vi) ofArticle 58(1)(c), when implementing financial instruments, mayfurther entrust, under their responsibility, part of that implementation to financial intermediaries provided that thoseentities ensure that the financial intermediaries satisfy thecriteria laid down in Article 140(1), (3) and (5). Financial intermediaries shall be selected on the basis of open, transparent,proportionate and non-discriminatory procedures, avoidingconflicts of interests.

The Commission shall remain responsible for ensuring that the

implementation framework for financial instruments complieswith the principle of sound financial management and supportsthe attainment of defined and timed policy objectives,measurable in terms of outputs and results. The Commissionshall be accountable for the implementation of financialinstruments without prejudice to the entrusted entities' legaland contractual responsibility in accordance with the applicablelaw.

5.Where financial instruments are implemented undershared management with Member States, the provisionsapplying to those instruments, including rules for contributionsto financial instruments managed directly or indirectly inaccordance with this Title, shall be laid down in the Regulationsreferred to in Article 175.

Financial instruments shall comply with the following:

(a) addressing market failures or sub-optimal investment situ

ations, which have proven to be financially viable but donot give rise to sufficient funding from market sources;

(b) additionality: financial instruments shall not be aimed at

replacing those of a Member State, private funding oranother Union financial intervention;

(c) non-distortion of competition in the internal market and

consistency with State aid rules;

(d) leverage effect: the Union contribution to a financial

instrument shall aim at mobilising a global investmentexceeding the size of the Union contribution according tothe indicators defined in advance;

(e) alignment of interest: when implementing financial instru

ments, the Commission shall ensure that there is a commoninterest in achieving the policy objectives defined for afinancial instrument, possibly fostered by provisions suchas co-investment, risk-sharing requirements or financialincentives, while preventing a conflict of interests withother activities of the entrusted entity;

(f) financial instruments shall be established on the basis of on

an ex ante evaluation, including an evaluation of the possiblere-use of additional resources referred to in point (f) ofparagraph 8.

3.The budgetary expenditure linked to a financial instrumentand the financial liability of the Union shall in no case exceedthe amount of the relevant budgetary commitment made for it,thus excluding contingent liabilities for the budget.

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4.The entities entrusted pursuant to points (ii), (iii), (v) and(vi) of Article 58(1)(c) and all financial intermediaries selected toparticipate in the execution of financial operations under afinancial instrument shall comply with relevant standards andapplicable legislation on the prevention of money laundering,the fight against terrorism and tax fraud. For the implementation of financial instruments in accordance with this Title,the entities entrusted pursuant to points (ii), (iii), (v) and (vi)of Article 58(1)(c) shall not be established, and shall notmaintain business relations with entities incorporated, in territories whose jurisdictions do not co-operate with the Union inrelation to the application of the internationally agreed taxstandard and shall transpose such requirements in theircontracts with the selected financial intermediaries.

5.Entities entrusted pursuant to points (ii), (iii), (v) and (vi)of Article 58(1)(c), financial intermediaries as referred to inparagraph 4 of this Article involved in managing Unionfinancial instruments, and final recipients of Union supportunder this Title shall afford the Court of Auditors all thefacilities and give it all the information which the Court ofAuditors considers necessary for the performance of its task,pursuant to Article 161.

Regulation (Euratom, EC) No 2185/96 and Regulation (EC)

No 1073/1999 of the European Parliament and of theCouncil of 25 May 1999 concerning investigations conductedby the European Anti-fraud Office (OLAF) (1) shall apply toUnion support under this Title.

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the balances available on the fiduciary accounts and the need to

avoid excessive balances on such amounts. In the event of theamounts on the fiduciary accounts being sufficient to cover thecontractually stipulated minimum reserve on the fiduciaryaccounts, as increased by the disbursement forecasts for thecurrent financial year, and to cover the amounts needed toexclude contingent liabilities in relation to payment obligationsin currencies other than euro, no further payment to thefiduciary accounts shall be made. Disbursement forecasts areto be provided on an annual or, where appropriate, on asemi-annual basis.

8.The Commission shall report annually to the EuropeanParliament and the Council on the activities relating tofinancial instruments. The report shall include, for eachfinancial instrument supported:

(a) an identification of the financial instrument and the basic

act;

(b) a description of the financial instrument, implementation

arrangements and the added value of the Unioncontribution;

(c) the financial institutions involved in implementation,

including any issues relating to the application ofparagraph 5;

6.Amounts corresponding at least to the Unioncontribution, or, where applicable, multiples thereof shall beused for the attainment of the specific policy objectivespursued through the financial instrument and shall notgenerate undue advantages, in particular in the form of unduedividends or profits for third parties.

(d) the aggregate budgetary commitments and payments from

the budget for each financial instrument;

Without prejudice to sector-specific rules for shared

management, revenues, including dividends, capital gains,guarantee fees and interest on loans and on amounts onfiduciary accounts paid back to the Commission or fiduciaryaccounts opened for financial instruments and attributable tothe support from the budget under a financial instrument, shallbe entered in the budget after deduction of management costsand fees.

(f) an evaluation of the use of any amounts returned to the

instrument as internal assigned revenue under paragraph 6;

(e) the performance of the financial instrument, including the

investments realised;

(g) the balance on the fiduciary account;

(h) revenues and repayments under paragraph 6;

Annual repayments, including capital repayments, guaranteesreleased, and repayments of the principal of loans, paid backto the Commission or fiduciary accounts opened for financialinstruments and attributable to the support from the budgetunder a financial instrument, shall constitute internal assignedrevenue in accordance with Article 21 and shall be used for thesame financial instrument, without prejudice to paragraph 9 ofthis Article, for a period not exceeding the period for thecommitment of appropriations plus two years, unless specifiedotherwise in a basic act.

(i) the value of equity investments, with respect to previous

years;

(j) the accumulated figures for impairments of assets of equity

or risk-sharing instruments, and for called guarantees forguarantee instruments;

(k) the target leverage effect, and the achieved leverage effect;7.Payments to fiduciary accounts shall be made by theCommission on the basis of payment requests that are dulysubstantiated with disbursement forecasts, taking into account(1) OJ L 136, 31.5.1999, p. 1.

(l) itscontribution to the achievement of the objectives of the

programme concerned as measured by the established indicators, including, where applicable, the geographical diversification.

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9.Where the European Parliament or the Council considerthat a financial instrument has not achieved its objectives effectively, they may request that the Commission submit a proposalfor a revised basic act with a view to the winding down of theinstrument. In the event of the winding down of the financialinstrument, any new repayments of that instrument pursuant tothe third subparagraph of paragraph 6 shall be considered asgeneral revenue.10.The purpose of the financial instruments and, whereapplicable, their specific legal form and legal place of registration shall be published on the Commission website.11.For financial instruments the authorising officerresponsible shall ensure that financial statements, covering theperiod 1 January to 31 December and in compliance with theaccounting rules referred to in Article 143 and the InternationalPublic Sector Accounting Standards (IPSAS), as well as any

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information necessary to produce financial statements in

accordance with Article 68(3), will be provided by the entitiesentrusted pursuant to points (ii), (iii), (v) and (vi) ofArticle 58(1)(c) by 15 February of the following year. The authorising officer responsible shall also ensure that audited financialstatements for financial instruments are provided by thoseentities by 15 May of the following year.12.The Commission shall ensure a harmonised managementof financial instruments in particular in the area of accounting,reporting, monitoring and financial risk management.13.The Commission shall be empowered to adopt delegatedacts in accordance with Article 210 concerning detailed rules onthe implementation of financial instruments, including theconditions for their use, the leverage effect, the ex-ante evaluation, the monitoring and the treatment of contributions fromthe Funds referred to in Article 175.

TITLE IXPRESENTATION OF THE ACCOUNTS AND ACCOUNTINGCHAPTER 1

Presentation of the accounts

Article 141Structure of the accountsThe accounts shall comprise:(a) the consolidated financial statements, which present theconsolidation of the financial information contained in thefinancial statements of the institutions financed by thebudget, those of the bodies referred to in Article 208 andof other bodies whose accounts are required to beconsolidated in accordance with the accounting rulesreferred to in Article 143;(b) the aggregated budgetary accounts which present theinformation contained in the budgetary accounts of theinstitutions.Article 142Report on budgetary and financial management1.Each institution and body referred to in Article 141 shallprepare a report on budgetary and financial management forthe financial year.

3.The Commission shall be empowered to adopt delegatedacts in accordance with Article 210 concerning detailed rules onthe report on budgetary and financial management.Article 143Rules governing the accounts1.The accounting officer of the Commission shall adoptrules based on internationally accepted accounting standardsfor the public sector. The accounting officer may divergefrom those standards if he or she considers this necessary inorder to give a true and fair view of the assets and liabilities,charges, income and cash flow. Where an accounting rulediverges materially from those standards, the notes to thefinancial statements shall disclose this fact and the reasons forit.

2.The budgetary accounts referred to in Article 141 shallrespect the budgetary principles laid down in this Regulation.They shall present a true and fair view of the budgetary revenueand expenditure operations.Article 144Accounting principles

They shall send the report to the European Parliament, the

Council and the Court of Auditors, by 31 March of thefollowing financial year.

1.The financial statements referred to in Article 141 shallpresent information, including information on accountingpolicies, in a manner that ensures it is relevant, reliable,comparable and understandable. The financial statements shallbe drawn up in accordance with generally accepted accountingprinciples as outlined in the accounting rules referred to inArticle 143.

2.The report referred to in paragraph 1 shall give anaccount, both in absolute terms and expressed as a percentage,at least, of the rate of implementation of appropriationstogether with summary information on the transfers of appropriations among the various budget items.

2.The Commission shall be empowered to adopt delegatedacts concerning the establishment of the framework for theimplementation by the accounting officer of his or her tasksunder this Article and Articles 145, 146, 148, 151, 154, 156and 157.

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The members of the consortium may make any arrangements

in the consortium they deem fit to the extent that thosearrangements are not in conflict with the grant agreement orthis Regulation.

4.The consortium may propose to add or remove aparticipant or change the coordinator in accordance with therelevant provisions of the grant agreement, provided that thechange is in conformity with the conditions for participation,does not adversely affect the implementation of the action andis not contrary to the principle of equal treatment.

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(a) it is part of the usual remuneration practices of the

participant and is paid in a consistent manner wheneverthe same kind of work or expertise is required;

(b) the criteria used to calculate the supplementary payments

are objective and of general application by the participant,independent of the source of funding used.

3.Additional remuneration may be eligible up to EUR 8 000per year and per person. In relation to a person not workingexclusively for the action, a limit per hour shall apply. The limitper hour shall be calculated by dividing EUR 8 000 by thenumber of annual productive hours calculated in accordancewith Article 31.

Forms of grants and funding rules

Article 25

Article 28

Forms of grants

Funding of the action

Grants may take any of the forms provided for in Article 123of Regulation (EU, Euratom) No 966/2012, taking into accountthe objectives of the action.

1.The funding of an action shall not exceed the total eligiblecosts minus the receipts of the action.

Article 26

2.

The following shall be considered as receipts of the action:

Eligibility of costs1.Conditions for eligibilitygy of costs are defined in Article 126of Regulation (EU, Euratom) No 966/2012. Costs incurred bythird parties under the action may be eligible according to theprovisions of this Regulation and of the grant agreement.

2.Ineligible costs are those not complying with theconditions of paragraph 1, including, in particular, provisionsfor possible future losses or charges, exchange losses, costsrelated to return on capital, costs reimbursed in respect ofanother Union action or programme, debt and debt servicecharges and excessive or reckless expenditure.

Article 27

(a) resources made available by third parties to the participants

by means of financial transfers or contributions in kind freeof charge, the value of which has been declared as eligiblecosts by the participant, provided that they have beencontributed by the third party specifically to be used inthe action;

(b) income generated by the action, except income generated by

the exploitation of the results of the action;

(c) income generated from the sale of assets purchased under

the grant agreement up to the value of the cost initiallycharged to the action by the participant.

Direct eligible personnel costs

1.Without prejudice to the conditions laid down inArticle 26, direct eligible personnel costs shall be limited tosalaries plus social security charges and other costs includedin the remuneration of personnel assigned to the action,arising from national law or from the employment contract.

2.Without prejudice to the conditions laid down inArticle 26, additional remuneration to personnel of participantsthat are non-profit legal entities assigned to the action,including payments on the basis of supplementary contractsregardless of their nature, may also be considered as directeligible personnel costs, up to the amount set out inparagraph 3, if they fulfil the following additional conditions:

3.A single reimbursement rate of the eligible costs shall beapplied per action for all activities funded therein. Themaximum rate shall be fixed in the work programme orwork plan.

4.The Horizon 2020 grant may reach a maximum of 100 %of the total eligible costs, without prejudice to the co-financingprinciple.

5.The Horizon 2020 grant shall be limited to a maximumof 70 % of the total eligible costs for innovation actions andprogramme co-fund actions.

EN

The grant agreement shall contain:

(b) the option to choose between a fixed number of annual

productive hours and the method for establishing the

(a) the minimum requirements for the time recording system;

3.

2.For persons working exclusively for the action, no timerecording is required. In such cases, the participant shall sign adeclaration confirming that the person concerned has workedexclusively for the action.

1.Eligible personnel costs shall cover only the actual hoursworked by the persons directly carrying out work under theaction. Evidence regarding the actual hours worked shall beprovided by the participant, usually through a time recordingsystem.

Annual productive hours

Article 31

The interim evaluation of Horizon 2020 shall include an

evaluation of the impact of the various features introduced bythe new funding levels laid down in Articles 27, 28 and 29 ofthis Regulation, with the aim of evaluating whether the newapproach has led to undesired situations adversely affecting theattractiveness of Horizon 2020.

Evaluation of the funding levels

Article 30

2.By way of derogation from paragraph 1, indirect costsmay be declared in the form of a lump sum or unit costswhen provided for in the work programme or work plan.

1.Indirect eligible costs shall be determined by applying aflat rate of 25 % of the total direct eligible costs, excludingdirect eligible costs for subcontracting and the costs ofresources made available by third parties which are not usedon the premises of the beneficiary, as well as financial supportto third parties.

Indirect costs

Article 29

6.The reimbursement rates determined in this Article shallalso apply in the case of actions where flat rate, unit or lumpsum financing is fixed for the whole or part of the action.

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The certificate on the financial statements shall cover the total

amount of the grant claimed by a participant under the form ofreimbursement of actual costs and under the form of unit costsreferred to in Article 33(2), excluding the amounts declared onthe basis of lump sums, flat rates and unit costs other thanthose determined according to the participant's usual costaccounting practices. The certificate shall be submitted onlywhen that amount is equal to or greater than EUR 325 000at the time of claiming the payment of the balance of the grant.

Certificate on the financial statements

Article 34

(d) they are calculated with due regard to Article 31.

(c) they ensure compliance with the non-profit requirement

and the avoidance of double funding of costs;

(b) they comply with Articles 26 and 27;

(a) they are calculated on the basis of the total actual personnelcosts recorded in the participant's general accounts whichmay be adjusted by the participant on the basis of budgetedor estimated elements according to the conditions definedby the Commission;

2.Direct eligible personnel costs may be financed on thebasis of unit costs determined according to the participant'susual cost accounting practices, provided that they complywith the following cumulative criteria:

(b) auditable historical data of the participant.

(a) statistical data or similar objective means;

1.In accordance with Article 124 of Regulation (EU,Euratom) No 966/2012, the Commission may establishmethods to determine unit costs based on:

Unit costs

Article 33

The owners of SMEs who do not receive a salary, and other

natural persons who do not receive a salary, may chargepersonnel costs on the basis of a unit cost.

1.A participant guarantee fund (the "Fund") is hereby established and shall cover the risk associated with non-recovery of

Participant Guarantee Fund

Article 38

Guarantees

Section IV

3.Where amounts are due to the Union by a participant, theCommission may, without prejudice to penalties which may beimposed on the defaulting participant, take either of thefollowing actions:

2.The participants' contribution to the Fund may be offsetfrom the initial pre-financing and be paid to the Fund on behalfof the participants.

The Commission may manage the Fund directly or entrust the

financial management of the Fund either to the EuropeanInvestment Bank or to an appropriate financial institution("the depository bank"). The depository bank shall manage theFund pursuant to the instructions of the Commission.

1.The Fund shall be managed by the Union, represented bythe Commission acting as executive agent on behalf of theparticipants, in accordance with the conditions established bythe grant agreement.Cumulative fundingAn action for which a grant from the Union budget has beenawarded may also give rise to the award of a grant on the basisof Regulation (EU) No 1291/2013, provided that the grants donot cover the same cost items.

Operation of the Fund

Article 39

6.The rate of the participants' contribution to the Fund setout in paragraph 5 may be reduced on the basis of the interimevaluation of Horizon 2020.

5.Participants in actions under Horizon 2020 whose risk iscovered by the Fund shall make a contribution of 5 % of theUnion funding for the action. At the end of the action theamount contributed to the Fund shall be returned to the participants, via the coordinator.

4.The Fund shall be considered a sufficient guarantee underRegulation (EU, Euratom) No 966/2012. No additionalguarantee or security may be accepted from participants orimposed upon them except in the case described in paragraph3 of this Article.

3.Where interest is insufficient to cover the operationsdescribed in Article 39(3), the Fund shall not intervene andthe Commission or the relevant Union funding body shallrecover directly from participants or third parties any amountowed.

2.The Fund shall be operated in accordance with Article 39.Any financial interest generated by the Fund shall be added tothe Fund and shall serve exclusively for the purposes set out inArticle 39(3).

Article 37

2.Upon request by the Commission, the Court of Auditorsor the European Anti-fraud Office (OLAF), the auditor whodelivers the certificate on the financial statements and on themethodology shall grant access to the supporting documentsand audit working papers on the basis of which a certificateon the financial statements or on the methodology was issued.

1.The certificates on the financial statements and on themethodology referred to in Articles 34 and 35 shall be established by an independent auditor qualified to carry out statutoryaudits of accounting documents in accordance with Directive2006/43/EC of the European Parliament and of the Council (1)or similar national regulations, or by a competent and independent public officer in whom the relevant national authoritieshave vested the legal capacity to audit the participant and whohas not been involved in the preparation of the financial statements.

Certifying auditors

Article 36

2.Where the Commission accepts a certificate on themethodology, it shall be valid for all actions financed underRegulation (EU) No 1291/2013 and the participant shallcalculate and claim costs on the basis of it. Once theCommission has accepted a certificate on the methodology, itshall not attribute any systemic or recurrent error to theaccepted methodology.

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sums due to the Union under actions financed through grants

by the Commission under Decision No 1982/2006/EC and bythe Commission or Union funding bodies under "Horizon2020" according to the rules set out in this Regulation. TheFund shall replace and succeed the Participant Guarantee Fundset up under Regulation (EC) No 1906/2006.

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Certificate on the methodology

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1.Participants that calculate and claim direct personnel costson the basis of unit costs in accordance with Article 33(2) maysubmit to the Commission a certificate on the methodology.That methodology shall comply with the conditions set out inArticle 33(2) and meet the requirements of the grant agreement.

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2.Independent experts shall be chosen on the basis of theirskills, experience and knowledge appropriate to carry out the

(e) the design of the Union research and innovation policy,

including the preparation of future programmes.

(d) the evaluation of Research and Innovation Programmes;

(c) the implementation of Union research and innovation

policy or programmes including Horizon 2020, as well asthe achievement and functioning of the European ResearchArea;

(b) the monitoring of the implementation of actions carried out

under Regulation (EU) No 1291/2013 as well as of previousResearch and/or Innovation Programmes;

(a) the evaluation of proposals;

Appointment of independent experts

Article 40

Experts

CHAPTER III

4.The amounts recovered shall constitute revenue assignedto the Fund within the meaning of Article 21(4) of Regulation(EU, Euratom) No 966/2012. Once the implementation of allgrants whose risk is covered by the Fund is complete, any sumsoutstanding shall be recovered by the Commission and enteredinto the budget of the Union, subject to decisions of the legislative authority.

The Commission shall issue a recovery order against that

participant or third party to the benefit of the Fund. TheCommission may adopt to that end a recovery decision inaccordance with Regulation (EU, Euratom) No 966/2012.

(b) recover effectively that amount from the Fund.

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5.The names of experts appointed in a personal capacity,who have assisted the Commission or the funding bodies inimplementation of Regulation (EU) No 1291/2013 andDecision 2013/743/EU shall be published, together with theirarea of expertise, at least once a year on the internet site of theCommission or the relevant funding body. Such informationshall be collected, processed and published in accordance withRegulation (EC) No 45/2001.

4.All exchanges with independent experts, including theconclusion of contracts for their appointment and anyamendment thereto, may be done through electronicexchange systems set up by the Commission or by therelevant funding body as stipulated in Article 287(4) of Regulation (EU) No. 1268/2012.

3.The Commission or the relevant funding body shallensure that an expert faced with a conflict of interest inrelation to a matter on which the expert is required toprovide an opinion does not evaluate, advise or assist on thespecific matter in question.

The Commission or the relevant funding body may call upon

the advice of advisory bodies for the appointment of independent experts. In the case of ERC frontier research actions,the Commission shall appoint experts on the basis of a proposalfrom the Scientific Council of the ERC.

When appointing independent experts, the Commission or the

relevant funding body shall take appropriate measures to seek abalanced composition within the expert groups and evaluationpanels in terms of various skills, experience, knowledge,geographical diversity and gender, and taking into account thesituation in the field of the action. Where appropriate, privatepublic sector balance shall also be sought.

The Commission or the relevant funding body may, if deemed

appropriate and in duly justified cases, select in a transparentmanner any individual expert with the appropriate skills notincluded in the database.

Independent experts shall be identified and selected on the basis

of calls for applications from individuals and calls addressed torelevant organisations such as research agencies, research institutions, universities, standardisation organisations, civil societyorganisations or enterprises with a view to establishing adatabase of candidates.

tasks assigned to them. In cases where independent experts have

to deal with classified information, the appropriate securityclearance shall be required before appointment.

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(a) transfer, or order the depository bank to transfer, directly

the amount due from the Fund to the coordinator of theaction. That transfer shall be made after the termination orwithdrawal of the participation of the defaulting participantif the action is still ongoing and if the remainingparticipants agree to implement it according to the sameobjectives. Amounts transferred from the Fund shall beregarded as Union funding;